SEC Response To Brauser Family Motion To Squash Subpoena Nov 2019

Case 1:19-mc-24587-MGC Document 5 Entered on FLSD Docket 11/18/2019 Page 1 of 26
UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA
---------------------------------------------------------------x
In re:
1:19-mc-24587-COOKE
Subpoenas directed to BEN BRAUSER,
DANIEL BRAUSER AND JOSHUA BRAUSER.
---------------------------------------------------------------x
MEMORANDUM OF LAW OF
RESPONDENT SECURITIES AND EXCHANGE COMMISSION
IN OPPOSITION TO THE MOTION TO QUASH SUBPOENAS DUCES TECUM,
OR IN THE ALTERNATIVE,
MOTION FOR PROTECTIVE ORDER OF PETITIONERS
BEN BRAUSER, DANIEL BRAUSER AND JOSHUA BRAUSER
SECURITIES AND EXCHANGE

COMMISSION
Nancy A. Brown
Jack Kaufman
200 Vesey Street, Suite 400
New York, NY 10281
(212) 336-1023 (Brown)
Attorneys for Respondent Securities and

Exchange Commission
November 18, 2019

TABLE OF CONTENTS
Page
Preliminary Statement......................................................................................................................1
Background ..................................................................................................................................2
1. The Commission's Complaint .............................................................................................2
2. Daniel Brauser's, Joshua Brauser's and Ben Brauser's Co-investments with

Michael Brauser ...................................................................................................................4
3. Ben Brauser's Additional Involvement in Michael Brauser's Investments.........................4
4. Relevance of Michael Brauser's Investments in Issuers Other than the

Three Identified in the Complaint ........................................................................................4
5. The Commission's Attempts to Lessen Petitioners' Burden of Compliance ......................6
ARGUMENT ..................................................................................................................................7
I. The Commission's Subpoena to Ben Brauser Does Not Call for the
Production of Privileged Material, and No Undue Burden Claim Is
Justified Simply Because Ben Brauser May Have Acted as Counsel for
His Father .............................................................................................................................8
II. Petitioners Have Not Established Undue Burden ............................................................. 10
A. The Subpoenaed Documents Are Relevant to the Underlying Litigation and

Discoverable ................................................................................................................11
1. The Information Sought Is Relevant to the SEC v. Honig Matter ........................11
2. The Requests Seek Documents from the Relevant Time Period ...........................13
3. Petitioners Have Waived Their Objection that the Commission Could

Obtain the Documents from the Parties to the Litigation ......................................14
B. Petitioners' Conclusory Claims of Burden Do Not Justify Quashing the Subpoenas .16
III. Because Petitioners Are Interested Non-Parties, They Should Bear the Costs
of Production (Including the Attorneys Fees Incurred in Filing Their
Motion to Quash) ...............................................................................................................17
CONCLUSION..............................................................................................................................20
i
TABLE OF AUTHORITIES
Page
CASES
Ala. Aircraft Indus., Inc. v. Boeing Co•, No. 11 Civ. 3577, 2016 WL 9781825
(N.D. Ala. Feb. 25, 2016) ..................................................................................................17-18
Benfatto v. Wachovia Bank, N.A., No. 08 Civ. 60646, 2008 WL 4938418

(S.D. Fla. Nov. 19, 2008) ...........................................................................................................8
Coleman v. Lennar Corp., 18 MC 20182, 2018 WL 3672251

(S.D. Fla. June 14, 2018) ............................................................................................... 9-10, 11
Davidson v. Gov't Emp. Ins. Co., No. 09 Civ. 727, 2010 WL 11507180
(M.D. Fla. Mar. 19, 2010)........................................................................................................17
Eastwood Enter., LLC v. Farha, 07 Civ. 1940, 2010 WL 11508180

(M.D. Fla. Apr. 26, 2010 .....................................................................................................8, 16
Espinosa v. 2K Clevelander, LLC, No. 17 Civ. 22783, 2018 WL 7820598

(S.D. Fla. Apr. 3, 2018) .............................................................................................................9
Glob. Intellicom, Inc. v. Thomson Kernaghan & Co., 99 Civ. 342 (DLC),
1999 WL 544708 (S.D.N.Y. July 27, 1999) ..............................................................................5
Goodman-Gable-Gould-Co. Inc. v. Tiara Condo. Assoc. Inc., No. 06 Civ. 80441,

2007 WL 9701950 (S.D. Fla. Apri16, 2007) ...........................................................................16
Hallwood Realty Partners, L.P. v. Gotham Partners, L.P.,

95 F. Supp. 2d 169 (S.D.N.Y. 2000)..........................................................................................5
Hawkins v. Medapproach Holdings, Inc•, No. 13 Civ. 5434, 2014 WL 11350177

(S.DN.Y. June 27, 2014)...........................................................................................................9
In re Monat Hair Care Prods. Mktg., Sales Practices and Prods. Liab. Liti~.,
No. 18 Civ. 20624, 2019 WL 5260284 (S.D. Fla. Aug. 20, 2019) ..........................................10
In re DG Acquisition Corgi, 151 F.3d 75 (2d Cir. 1998)...............................................................15
In re Seroquel Prods. Liab. Liti~., No. 06-md-1769, 2007 WL 4287676

(M.D. Fla. Dec. 6, 2007) ..........................................................................................................17
In re World Trade Ctr. Disaster Site Liti~., No. 21 MC 100 (AKH),

2010 WL 3582921 (S.D.N.Y. Sept. 14, 2010).........................................................................19
ii
Page
Horace Mann Ins. Co. v. Nationwide Mut. Ins. Co., 240 F.R.D. 44 (D. Conn. 2007) ....................9
Lerner v. Millenco, LP, 23 F. Supp. 2d 337, 344 (S.D.N.Y. 1998) .................................................5
Managed Care Sols., Inc. v. Essent Healthcare, Inc., No. 09 Civ. 60351,
2010 WL 3419420 (S.D. Fla. Aug. 27, 2010).................................................................... 16-17
Manhattan Constr. Co. v. Phillips, No. 09 Civ. 1917, 2011 WL 13214355

(N.D. Ga. May 11, 2011) .........................................................................................................15
Marjam Supply Co. of Fla., LLC v. Pliteq Inc•, No. 15 Civ. 24363,
2018 WL 1456614 (S.D. Fla. Mar. 23, 2018) ..........................................................................10
Morales v. Freund, 163 F.3d 763 (2d Cir. 1999) ...........................................................................13
Morales v. Quintel Entm't, Inc., 249 F.3d 115 (2d Cir. 2001) ........................................................5
Northrop Corp. v. McDonnell Douglas Corgi, 751 F.2d 395 (D.C. Cir. 1984) .............................10
Ott v. Citv of Milwaukee, 682 F.3d 552 (7t'' Cir. 2012) .......................................................... 14-15
Plouffe v. GEICO Gen. Ins. Co., 16 Civ. 25145, 2017 WL 7796323

(S.D. Fla. Aug. 8, 2017) .............................................................................................................7
Queen v. State Farm Mut. Ins. Co., No. 19 Civ. 21931, 2019 WL 3716806
(S.D. Fla. Aug. 7, 2019) .....................................................................................................10, 12
Roth v. Jennings, 489 F.3d 499 (2d Cir. 2007) ...................................................................... 4-5, 13
Sallah v. Worldwide Clearing LLC, 855 F. Supp. 2d 1364 (S.D. Fla. 2012) ................................16
SEC v. City of Miami, 581 F. App'x 757 (1lt~' Cir. 2014) ............................................................19
SEC v. Solow, No. 09 Civ. 61868, 2011 WL 13277546 (S.D. Fla. Mar. 14, 2011) .......................9
TIC Park Centre 9, LLC v. Cabot, No. 16 Civ. 24569, 2017 WL 9988745
- (S.D. Fla. June 9; 2017) .........:.:.........::......:...........................................................:..:..............14
United States v. Blue Cross Blue Shield of Mich., No. 10 Civ. 14155,
2012 WL 4838987 (E.D. Mich. Oct. 11, 2012) .................................................................18, 19
Wellman v. Dickinson, 682 F.2d 355 (2d Cir. 1982) ................................................................5, 13
Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812 (5th Cir. 2004) .............................7, 10, 14, 19
iii
Page
STATUTES AND RULES
Securities Act of 1933
Section 17(a), 15. U.S.C. § 77q(a) .............................................................................................3
Securities Exchange Act of 1934
Section 10(b), 15 U.S.C. § 78j(b) ............................................................................................. 3
Rule lOb-5, 17 C.F.R. § 240.1Ob-5 ......................................................................................3
Section 13(d), 15 U.S.C. § 78m(d) .................................................................................. assim
Rule 13d-5(b)(1), 17 C.F.R. § 240.13d-5(b)(1) ...............................................................4-5
Fed. R. Civ. P. 26 ...........................................................................................................................11
Fed. R. Civ. P. 45 ...............................................................................................................10, 14, 17
iv
Respondent Securities and Exchange Commission (the "Commission") respectfully
submits this Memorandum of Law in Opposition to the Motion to Quash, or in the Alternative,
Motion for Protective Order ("Motion") submitted by Petitioners Ben Brauser, Daniel Brauser
and Joshua Brauser (collectively "Petitioners")
Preliminary Statement
Petitioners' Motion should be denied in all respects. Despite Petitioners' best efforts to
distance themselves from the Commission's Complaint —which alleges that their father (Michael
Brauser) and his cohort ran a series of fraudulent pump-and-dump schemes involving dozens of
companies that issued securities ("issuers") over nearly adecade —Petitioners frequently co-
invested with their father in the same issuers, including at least two of the three explicitly
identified in the Commission's Complaint. Given their deep involvement, Petitioners are likely
sources of relevant information, which they should be required to produce.
Petitioner Ben Brauser's involvement in his father's investments runs even deeper than
his brothers'. Ben Brauser wore two hats, apparently acting as both his father's counsel and his
investment assistant —communicating with issuers, other Defendants, and brokers to facilitate
and effect his father's securities transactions. Because those investments are at the heart of the
Commission's claims, Ben Brauser's central role makes him a key source of relevant, non-
privileged information, which he should be required to produce.
Petitioners' principal objection to the Commission's subpoenas issued September 30,
2019 (the "Subpoenas") is undue burden, but it fails. Petitioners fail to state how many
documents are responsive to any one of the Subpoenas, claiming instead only that their collective
emails —whether relevant or not, responsive or not, personal or not — tota199 gigabytes of data.
That claim is insufficient to carry their heavy burden of demonstrating the size of the relevant
and responsive material that they would have to review to produce.
Finally, contrary to the impression they give, Petitioners filed their Motion while still
negotiating with the Commission over the Subpoenas' scope. During the parties' November 4,
2019 meet-and-confer, Petitioners Daniel and Joshua Brauser offered to produce only limited
materials responsive to their Subpoenas, and Ben Brauser asked that the Commission withdraw
his Subpoena entirely. The Commission responded that it would consider their proposals and
respond promptly. The next day, without further warning, Petitioners filed this Motion.
Back ground
The Commission's Complaint. On September 8, 2018, the Commission filed its
action, SEC v. Honig et al•, 18 Civ. 8175 (ER) (S.D.N.Y.) ("Honig"), against ten individuals,
including Petitioners' father, Michael Brauser, and ten corporate entities. (Declaration of Nancy
A. Brown, executed November 18, 2019 ("Brown Decl.") ¶ 2.) After settling with Defendants
Phillip Frost and Mark Groussman (and their respective entities), the Commission filed an
Amended Complaint, on March 8, 2019 ("Complaint" (submitted herewith as Exhibit A to
Petitioners' Motion)). (Brown Decl. ¶ 2.) Consistent with Commission practice, the Complaint
refers by name only to Defendants, not to third-party witnesses or their related entities. (Id.)
The Complaint alleges adecade-long pattern of fraudulent pump-and-dump schemes
involving Defendants Barry Honig, Michael Brauser, John Stetson, and John O'Rourke, and their
entities, (the "Core Defendants'), and individuals and entities that the Core Defendants allowed
to co-invest with them. (Complaint ¶¶ 55-66.) In the typical pump-and-dump scheme, as here,
defendants gain undisclosed control over a large portion of an issuer's public securities, secretly
pay for a promotional campaign for the issuer that paints a false picture of its rosy prospects, and
sometimes engage in manipulative trading to create the false impression of market interest.
2
Then, when the stock price and volume increase on the false news they have arranged to be
disseminated, and their manipulative trading, defendants dump their shares in the market.
(Complaint ¶¶ 48-54.)
The Complaint alleges violations of several provisions of the federal securities laws,
including the antifraud provisions —Section 10(b) of the Securities Exchange Act of 1934
("Exchange Act"), Rule lOb-5 thereunder, and Section 17(a) of the Securities Act of 1933.
(Complaint ¶¶ 195-210.) The Complaint also alleges violations of Exchange Act Section 13(d)
(id. ¶¶ 259-265), which requires persons who agree to buy, hold, sell and/or vote their securities
together to disclose their collective ownership.
The Complaint focuses on schemes that Defendants hatched with three issuers — BioZone
Pharmaceuticals Inc. ("BioZone"), MGT Capital Investments, Inc. ("MGT"), and MabVax
Therapeutics Holdings, Inc. ("MabVax") —from November 2010 through February 2018
(Complaint ¶¶ 82, 194). (See also Brown Decl. ¶ 4.) The Complaint further alleges, however,
that the schemes involving those three issuers are only a small sampling of the dozens of pump-
and-dump schemes in which the Core Defendants engaged, and that their conduct in those three
schemes followed their long-standing illicit pattern and practice. (Complaint ¶ 55.) Thus, and
highly relevant here, the Complaint alleges that between 2011 and mid-2018, Defendant Michael
Brauser, Petitioners' father, co-invested with Defendant Honig in over 40 issuers. (Id. ¶ 60.)
In addition, the Complaint alleges that, for their schemes to work, Defendants carefully
selected those invited to co-invest, to ensure that all participants worked together for the
schemes' ultimate success. Thus, the Complaint alleges, the Core Defendants allowed only those
they trusted to participate, so that "shares were held only by individuals and entities that (1)
permitted Honig to direct how they voted their shares and/or acquiesced in Honig's control of the
3
management of the company, and (2) refrained from selling their shares until the optimal time
for group members to profit from the planned post-pump dump." (Id. ¶ 57.) The Complaint
further alleges in particular that Michael Brauser frequently co-invested with Honig through his
own accounts, his entity's account (Defendant Grander Holdings, Inc.), "or through family
members' accounts." (Id. ¶ 60.) Those "family members" include Petitioners Ben Brauser,
Joshua Brauser and Daniel Brauser.
2. Daniel Brauser's, Joshua Brauser's and Ben Brauser's Co-investments with
Michael Brauser. All three Petitioners were frequent co-investors with their father, Defendant
Michael Brauser, including in issuers named in the Commission's Complaint and Subpoenas.
(~E ., Brown Decl. ¶ 6 and Ex. A.)
3. Ben Brauser's Additional Involvement in Michael Brauser's Investments. From
2011 through at least 2016, Ben Brauser appears to have acted as Michael Brauser's assistant in
communicating (by email) with brokers and issuers regarding all aspects of Michael Brauser's
investments. (Brown Decl. ¶ 7, Ex. B (sample email correspondence between Ben Brauser and
various third parties relating to Michael Brauser's and his brothers' investments).) None of those
emails appears to involve legal services. Furthermore, Michael Brauser has never asserted that
an attorney-client relationship existed between him and his son. (Brown Decl. ¶ 9.)
4. Relevance of Michael Brauser's Investments in Issuers Other than the Three
Identified in the Complaint. Discovery regarding whether and when the Brauser family members
co-invested with each other, and with Honig, is relevant to the Complaint's allegations that
Defendant Michael Brauser violated Exchange Act Section 13(d) —regarding his filing false
Schedule 13G's that failed to disclose his membership in a group with Honig and others,
including his sons. Under Section 13(d)(3) and Rule 13d-5(b)(1), if two or more persons agree
!!
to act together "for the purpose of acquiring, holding, voting or disposing" of the securities, "the
group formed thereby shall be deemed to have acquired beneficial ownership . . . of all equity
securities of that issuer beneficially owned by any such persons." Roth v. Jennings, 489 F.3d
499, 507 (2d Cir. 2007) (quoting Rule 13d-5(b)(1), 17 C.F.R. § 240.13d-5(b)(1)). The rule is
meant to prevent evasion of the disclosure requirement when two or more persons act together
but keep their individual holdings below the reporting threshold. Morales v. Quintel Entm't,
Inc., 249 F.3d 115, 123 (2d Cir. 2001) (quoting Wellman v. Dickinson, 682 F.2d 355, 366 (2d
Cir. 1982)). Whether two or more persons are acting as a "group" for Section 13(d) purposes —
and whether their group purpose was the acquisition, holding, voting or disposition of an issuer's
equity securities —are questions of fact. Roth, 489 F.3d at 508.
One factor courts consider in determining whether a "group" exists for Section 13(d)
purposes is the history of co-investment among the alleged group members. uintel, 249 F.3d at
127 (citing the group's pre-existing common relationship as sole shareholders of a closely-held
corporation); Hallwood Realty Partners, L.P. v. Gotham Partners, L.P., 95 F. Supp. 2d 169, 173
(S.D.N.Y. 2000) (noting the long-standing investing and personal relationships among
defendants); Glob. Intellicom, Inc. v. Thomson Kernaghan & Co., 99 Civ. 342 (DLC), 1999 WL
544708, at * 14 (S.D.N.Y. July 27, 1999) (citing allegation that "various of these Defendants
have engaged in . . . similar transactions with other public companies" to deny motion to
dismiss); Lerner v. Millenco, LP, 23 F. Supp. 2d 337, 344 (S.D.N.Y. 1998) (citing allegations
_ _
that defendant had coordinated its investments with other members of the alleged group "on
numerous prior occasions").
Thus, whether and how frequently Defendant Brauser co-invested with Honig and others,
including his own sons, is relevant to whether he acted together with them in connection with his
E
investments in BioZone, MGT and MabVax, and thus, whether he violated Section 13(d).
In the Commission's underlying case, Defendant Brauser himself acknowledged the
relevance of the additional issuers to the Commission's Complaint. In a letter he wrote to Judge
Ramos in the Southern District, Defendant Brauser noted that any effort the Commission made
to discover information about his investments in other issuers must be made within the Honig
litigation, on notice to him, and not through the Commission's investigative powers, because the
Commission had placed Defendant Brauser's "pattern of `pump-and-dump schemes"' involving
dozens of issuers at the "core" of its Complaint. (See Brauser Letter to Court, dated September
18, 2019 (appended to Petitioners' Motion as Ex. H), at 2, 3 ("If . . .the SEC is using its
administrative subpoena powers to investigate the very pattern of conduct it claims is continuing
— and asks the Court to enjoin —then it should be utilizing court-issued subpoenas pursuant to the
Federal Rules of Civil Procedure.").)'
5. The Commission's Attempts to Lessen Petitioners' Burden of Compliance.
Petitioners disingenuously contend that they negotiated in good faith with the Commission to
lessen the Subpoenas' alleged burden on them. On October 23, 2019, in the first telephonic
meet-and-confer between Commission counsel and Petitioners' counsel, the Commission sought
to understand which of the Subpoenas' requests were actually burdensome. Yet Petitioners'
counsel had no information concerning the volume of responsive documents in his clients'
possession. Petitioners' counsel represented only that Petitioners were unfamiliar with many of
the persons and entities named in the Subpoenas. (Brown Decl. ¶ 12.) The Commission then
asked Petitioners' counsel to attempt to determine the number of responsive documents so that it
' It is not surprising that Defendant Brauser has not challenged the Subpoenas in the
Southern District of New York; they seek information regarding matters he claims are relevant to
that case.
could understand the relative burden of responding to specific subpoena requests. (Id.)
In the second meet-and-confer conversation, on November 4, 2019, Petitioner's counsel
announced that he had collected all of Petitioners' emails for the requested period, and that they
comprised 99 gigabytes of data. (Brown Decl. ¶ 13.) However, counsel was unable to state what
portion of that collection, if any, related to the topics in the Subpoenas, and he provided no
breakdown of the data by custodian. (Id.) Furthermore, because he had run no searches to
identify which, if any, of the Subpoena requests returned a large number of responsive
documents, he could not specify which requests were actually burdensome. (Id.) Instead, during
that same call, Petitioners' counsel asked the Commission (1) to withdraw its Subpoena to Ben
Brauser in its entirety, and (2) to limit the Subpoenas to Daniel and Joshua Brauser to the time
period 2013-2016, and to only the three issuers specifically identified in the Complaint. (Id. ¶
14.) The Commission responded that it would consider Petitioners' counsel's requests and revert
promptly. (Id.)
Instead of waiting for the Commission's response, Petitioners filed their Motion the next
day, even though the parties had agreed to extend Daniel and Joshua Brauser's time to produce
until November 13, 2019, and Ben Brauser's to December 13, 2019. (Brown Decl. ¶ 14.)
ARGUMENT
A Court may quash or modify a subpoena if the moving party demonstrates that it "`(1)
fails to allow a reasonable time for compliance; (2) requires a person who is not a party to travel
more than 100 miles from where the person resides; (3) requires disclosure of privileged or
protected matter; or (4) subjects a person to `undue burden."' Plouffe v. GEICO Gen. Ins. Co.
16 Civ. 25145, 2017 WL 7796323, at * 1 (S.D. Fla. Aug. 8, 2017) (quoting Wiwa v. Royal Dutch
Petroleum Co., 392 F.3d 812, 817-18 (5th Cir. 2004). In their Motion, Petitioners assert the latter
7
two grounds. However, because the Subpoena seeks no privileged documents, and because
Petitioners cannot satisfy their burden to show how the Subpoenas subject them to undue burden,
the Court should deny Petitioners' Motion and order them to comply promptly.
I. The Commission's Subpoena to Ben Brauser Does Not Call for the Production of
Privileged Material, and No Undue Burden Claim Is Justified Simply Because Ben
Brauser May Have Acted as Counsel for His Father
On its face, the Commission's Subpoena does not call for the production of privileged
material from Ben Brauser or any of the other Petitioners. Indeed, the Commission was not even
aware that Ben Brauser claimed to represent his father as counsel when it issued the Subpoena to
him. (Brown Decl. ¶ 9.) Nor do the documents the Commission has collected from other
sources indicate that Ben Brauser acted as anything but Michael Brauser's assistant in effecting
his investments and facilitating his purchase and sale of stock. Ben Brauser's conclusory
assertions to the contrary —that he has served as legal counsel for his father since February 2010
and that, therefore, his communications with him (and with third parties on his father's behalf
"would likely be subject to the attorney-privilege [sic] or the work-product doctrine"
(Petitioners' Memorandum in Support (DE 1) ("Brauser Mem.") at 14) — do not satisfy his
burden on his Motion. Eastwood Enter., LLC v. Farha, 07 Civ. 1940, 2010 WL 11508180, at *3
(M.D. Fla. Apr. 26, 2010) (conclusory assertions of privileged nature of documents sought
"insufficient to justify quashing or modifying" subpoena and citing cases); see also Benfatto v.
Wachovia Bank, N.A., No. 08 Civ. 60646, 2008 WL 4938418, at *2 (S.D. Fla. Nov. 19, 2008)
(rejecting claim that discovery requests seek privileged documents where objecting party failed
to "provid[e] a privilege log in accordance with the Federal and Local Rules")
Ben Brauser makes the unavailing argument that his status as Michael Brauser's counsel
renders his Subpoena compliance unduly burdensome. (Brauser Mem. at 14-15 ("[T]he
E:3
documents sought by the SEC are subject to the attorney-client privilege . . . [E]ach record . . .
would need to be reviewed manually by Ben Brauser and the undersigned for privilege and
work-product doctrine protection.").) But a party may not resist a subpoena based on conclusory
arguments that "an entire production of documents in relation to a third party subpoena must be
reviewed to determine whether any items are privileged or not." Espinosa v. 2K Clevelander,
LLC, No. 17 Civ. 22783, 2018 WL 7820598, at * 1 (S.D. Fla. Apr. 3, 2018) (denying motion to
quash or for protective order on conclusory argument that all documents called for would have to
be reviewed for privilege) (citing Hawkins v. Medapproach Holdings, Inc•, 2014 WL 11350177,
at *3 (S.D.N.Y. June 27, 2014)). Absent a more particularized showing that reviewing his
documents would impose an undue burden upon him, Ben Brauser cannot justify quashing the
Subpoena in its entirety.
Furthermore, it does not appear that Ben Brauser can make such a particularized
showing; many of his documents are likely not privileged. For example, his communications
with third parties —even if on behalf of his father —are not privileged. SEC v. Solow, No. 09
Civ. 61868, 2011 WL 13277546, at *4 (S.D. Fla. Mar. 14, 2011) ("Typically, any disclosure of a
communication inconsistent with preserving its confidentiality waives the privilege.") Ben
Brauser has made no attempt to show any difficulty or expense of segregating and producing all
third-party communications over which no privilege claim could obtain.
Finally, Ben Brauser has waived any such privilege objection by failing to provide the
Commission a privilege log of such communications between him and his father. Horace Mann
Ins. Co. v. Nationwide Mut. Ins. Co., 240 F.R.D. 44, 47-48 (D. Conn. 2007) (denying motion to
quash on privilege grounds where objecting party did not furnish log with objections or in a
reasonable time thereafter); cf. Coleman v. Lennar Corp., 18 MC 20182, 2018 WL 3672251, at
D
*7 (S.D. Fla. June 14, 2018) (recognizing the rule but granting subpoenaed party more time to
comply). Absent a privilege log — even a log by category —neither the Commission nor the
Court can assess the viability of Ben Brauser's privilege claims. As but one example, Ben
Brauser maintains that his communications with or about his father are protected by the work-
product doctrine. (Brauser Mem. at 15.) But unless and until Ben Brauser identifies what
litigation he was anticipating when he had each of those communications, his blanket work-
product claim is impossible to evaluate. In re Monat Hair Care Prods. Mktg., Sales Practices and
Prods. Liab. Liti~., No. 18 Civ. 20624, 2019 WL 5260284, at *4 (S.D. Fla. Aug. 20, 2019)
(holding documents that were not prepared in anticipation of litigation were not protected).
II. Petitioners Have Not Established Undue Burden
Courts weigh the following factors in considering a party's claim of undue burden under
Rule 45: "(1) [the] relevance of the information requested; (2) the need of the party for the
documents; (3) the breadth of the document request; (4) the time period covered by the request;
(5) the particularity with which the party describes the requested documents; and (6) the burden
imposed." Queen v. State Farm Mut. Ins. Co., No. 19 Civ. 21931, 2019 WL 3716806, at *2
(S.D. Fla. Aug. 7, 2019) (quoting Wiwa, 392 F.3d at 818). In analyzing these factors, the Court
should "consider the possibility of modifying the subpoena rather than quashing." Id. (quoting
Northrop Corp. v. McDonnell Douglas Corp., 751 F.2d 395, 403 (D.C. Cir. 1984)). While the
Commission bears the burden of showing that the Subpoenas seek relevant information,
Petitioners must demonstrate that compliance would impose undue burden. Marjam Supply Co.
of Fla., LLC v. Pliteq. Inc., No. 15 Civ. 24363, 2018 WL 1456614, at *5 (S.D. Fla. Mar. 23,
2018).
10
A. The Subpoenaed Documents Are Relevant to the Underlying Litigation and

Discoverable
1. The Information Sought Is Relevant to the SEC v. Honig Matter
To assess the relevancy of subpoena requests, courts apply the broad relevancy standards
set out in Fed. R. Civ. P. 26. Coleman, 2018 WL 3672251, at *2 (citing cases). "Parties may
obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or
defense and proportional to the needs of the case. . ." Fed. R. Civ. P. 26(b)(1). Here, the
documents requested in Request No. 1 concern investments by Michael Brauser, a Defendant,
and his sons —who co-invested with Brauser as part of a group, or in whose accounts Brauser
amassed positions. All of the issuers named in Request No. 1 are issuers in which Defendant
Brauser co-invested with Honig. (Petitioners' Motion, Exs. A, B and C, Request No 1; Brown
Decl. ¶ 8.) In addition, the Complaint alleges that Brauser (either on his own behalf or through
accounts belonging to family members) engaged in a nearly decade-long scheme to fraudulently
pump and dump the securities of more than 40 separate issuers, and that Brauser's failure to
disclose his membership in a group with (at least) Honig violated Exchange Act 13(d).
(Complaint ¶¶ 60-61, 259-265.) That the Subpoenas seek information about issuers not
specifically identified in the Complaint does not render the information it seeks irrelevant;
Brauser himself has already acknowledged the relevance of information regarding the investment
"pattern" that the Complaint alleges. (Petitioners' Motion, Ex. H.)
-Request No. 2 also seeks relevant information: Petitioners' communications with any of
certain identified individuals regarding the three issuers identified in the Complaint. First, it
targets the three named issuers, the relevance of which Petitioners' counsel concedes in agreeing
to search for such communications for Petitioners Daniel Brauser and Josh Brauser. (Brown
Decl. ¶ 14.) In addition, there is no requirement that information sought in discovery be limited
11
to persons and entities named in a complaint. See, sme ., ueen, 2019 WL 3716806, at *3
(rejecting motion to quash subpoena issued to non-party and person whom complaint did not
identify where issuing party pointed to evidence of her involvement in defendants' underlying
conduct).
Petitioners' relevance objections to Request No. 3 is similarly unfounded. That Request
seeks communications with two individuals and seven entities —all involved in stock promotions
— regarding issuers in which Petitioners or their father invested during the relevant period.
(Brown Decl. ¶ 8.) In apre-motion email to the Commission, Petitioners' counsel objected to
this request because only one of the seven entities was named in the Complaint. (Brown Decl.,
Ex. D (Objection Email).) Although not named in the Complaint, the interaction of those seven
stock promotion persons and entities with Petitioners and Michael Brauser are relevant to a
central aspect of the alleged schemes: the group's secret payments to stock promoters to pump
up the price of the stock. (Complaint ¶¶ 55; 72-79; 103-105; 108-111; 128-130; 139; 146; 186;
189.) The Request for those communications with those individuals and entities is therefore
relevant.
Request No. 4 seeks communications by Petitioners with Defendants and two settled
Defendants regarding the list of issuers provided in Request No. 1 and "concerning the exercise
of voting rights held by" Petitioners or Defendant Brauser. As noted above, Defendants Brauser
and Honig jointly invested in each of those issuers, and Petitioners likewise invested in many of
them. (Brown Decl. ¶¶ 6, 8.) To the extent Petitioners did not invest in some of those issuers,
they will have fewer documents to review and produce.
Petitioners have already conceded the relevance of Request 4, at least insofar as it
concerns issuers named in the Complaint. (Brown Decl. ¶ 14; Ex D (Objection Email).) As
12
explained above, those issuers not named in the Complaint are part of Brauser's alleged pattern
of group investing and, thus, are relevant to the Commission's Section 13(d) claims (as
Defendant Brauser has already acknowledged). Like the relevance of the group's history of
investments, their history of voting in concert is also a factor courts consider in determining
whether they acted as a group. The touchstone of a group is that "the members combined in
furtherance of a common objective," Wellman, 682 F.2d at 363, but that objective need only be
one of the enumerated purposes: acquisition, holding, voting or disposing. Roth, 489 F.3d at
508 (emphasis added) (citing Morales v. Freund, 163 F.3d 763, 767 n.5 (2d Cir. 1999)). Thus,
Defendant Brauser's discussions with his sons —and their discussions with other group members
— regarding voting their shares in any issuer in which they were co-invested may demonstrate
that they were acting as a group with Defendant Brauser under Exchange Act Section 13(d).
Petitioners object to Request No. 5 on the same grounds. Request No. 5 seeks documents
concerning Petitioners' preparation or filing of Schedules 13D or 13G during the relevant period
as to their holdings in any of the issuers listed in Request No. 1. Again, Petitioners object on
relevance grounds only as to issuers not specifically identified in the Complaint. (Brown Decl. ¶
14; Ex. D (Objection Email).) Thus, for the same reasons set forth above —the pattern of
investment alleged in the Complaint, and the importance of the history of co-investment
identified in the Section 13(d) case law —Request No. 5 seeks information relevant to the
Commission's claims under Exchange Act Section 13(d).
2. The Requests Seek Documents from the Relevant Time Period
The Subpoenas' "Relevant Period" is appropriate in light of the sweeping scheme at issue
in the Honig litigation. Petitioners argue that the Requests should be trimmed to the three-year
period 2013-2016. (Brauser Mem. at 11.) But courts considering appropriate time periods look
13
E A., TIC Park Centre 9, LLC v. Cabot, No. 16 Civ. 24569,

to the allegations of the Complaint. T
2017 WL 9988745, at *5 (S.D. Fla. June 9, 2017) (setting the relevant time period at nine years,
where complaint alleged that defendants' wrongful conduct began in 2006); see also Wiwa, 392
F.3d at 821 (trimming scope of time frame to that alleged in the complaint). The Complaint
alleges that, in November 2010, Brauser and other Defendants embarked on a scheme to pump
and dump the shares of what became BioZone. (Complaint ¶¶ 80-82.) Thus, discovery should
extend at least back to November 2010. That Defendants sold their BioZone shares after their
pump in October 2013 (id. ¶ 112) improperly focuses on the culmination of the scheme, while
ignoring the steps that led up to it. Likewise, Defendants' conduct continued until February
2018 —the month in which two of the Defendants and scheme participants made their last false
and misleading Schedule 13D filings regarding their investments in MabVax. (Complaint
¶ 194.) Thus, the Subpoenas definition of the "Relevant Period" as running from November
2010 through March 2018 tracks the allegations of the Complaint and sets an appropriate time
frame.
3. Petitioners Have Waived Their Objection that the Commission Could

Obtain the Documents from the Parties to the Litigation
Petitioners have waived any objection that the Subpoenas improperly call for documents
that the Commission could obtain from others. Although Petitioners served their objections on
October 17, 2019, calling them their "formal objections" (Brown Decl., Ex. D (Objection Email),
they did not raise that particular objection until their Motion to Quash. (Brauser Mem. at 10.)
Rule 45(d)(2)(B) requires a subpoena recipient to serve its objections before the "earlier of the
time specified for compliance or 14 days after the subpoena is served." And the recipient must
include in those objections all of those he asserts, or he waives any objection he omits. Ott v.
City of Milwaukee, 682 F.3d 552, 558 (7th Cir. 2012) (holding manner of service objection
14
waived where not included in objections served); In re DG Acquisition Corgi, 151 F.3d 75, 81
(2d Cir. 1998) ("recipient of a subpoena [must] raise all objections at once, rather than in
staggered batches, so that discovery does not become a `game"') (quotations omitted);
Manhattan Constr. Co. v. Phillips, No. 09 Civ. 1917, 2011 WL 13214355, at * 13 (N.D. Ga. May
11, 2011) (holding omitted objection waived).
Not only did Petitioners fail to include that objection in their Objection Email, but in
declaring what they were willing to produce during the parties' November 4 meet and confer,
Petitioners included communications between Daniel and Joshua Brauser and all of the
Defendants, so long as they were limited to the three issuers named in the Complaint. (Brown
Decl. ¶ 14; see also id., Ex. D (Email Objection, ¶ C).) Thus, Petitioners have waived any
argument that the Commission should seek documents from the parties instead of from them.
Even if Petitioners could successfully assert that objection, it would not excuse their
obligation to produce communications with persons and entities other than the named parties to
the Honi case. Petitioners do not contend that all of their documents are communications with
Defendants. Indeed, the few pertinent documents the Commission has gathered to date
demonstrate that Petitioners possess responsive emails on which no Defendant was copied, such
that the Commission could not obtain them from the parties. (Brown Decl., Ex. B.) In addition,
the Honig parties may not have retained all of the documents that the Commission seeks from
Petitioners, even if copied on them. The Commission has appended at least one responsive email
that was copied to Defendant Brauser, but that appears nowhere in Defendant Brauser's
production. (Brown Decl. ¶ 7 and Ex. C.) It thus appears likely that Petitioners possess other
responsive documents that the Commission will be unable to secure from Defendants.
15
B. Petitioners' Conclusory Claims of Burden Do Not Justify Quashing the

Subpoenas
Petitioners have not met their heavy burden to establish that the Subpoenas are unduly
burdensome. Goodman-Gable-Gould-Co., Inc. v. Tiara Condo. Assoc., Inc., No. 06 Civ. 80441,
2007 WL 9701950, at *2 (S.D. Fla. Apri16, 2007) (party "seeking to quash a subpoena bears a
heavy burden of proof') (citations omitted). They rely solely on Ben Brauser's Declaration,
which merely sets forth how many gigabytes of data their collective emails —responsive or not —
comprise for the time period requested. (See Declaration of Ben Brauser ¶ 8.) However, they
offer no evidence regarding what portion of those emails is relevant and producible.
Presumably, the 99 GBs include personal emails and others wholly unrelated to the Complaint.
Nor do Petitioners offer any evidence regarding the cost of searching those emails to locate ones
initially responsive.2 The Brauser Declaration does not even indicate which portion of the 99
GBs relates to which Petitioner, let alone what portion relates to any search term or production
request.
To satisfy their burden, Petitioners must offer more than the conclusory claims of burden
they raise. Eastwood Enter., 2010 WL 11508180, at *5 (rejecting claim of burden where
Petitioners offered insufficient quantification of the "number of documents at issue," or an
explanation of "why the documents at issue are not identified with sufficient particularity");
accord Sallah v. Worldwide Clearing LLC, 855 F. Supp. 2d 1364, 1376 (S.D. Fla. 2012) ("claims
of undue burden should be supported by a statement (generally an affidavit) with specific
information demonstrating how the request is overly burdensome"); Managed Care Sols., Inc. v.
Essent Healthcare, Inc., No. 09 Civ. 60351, 2010 WL 3419420, at *3 (S.D. Fla. Aug. 27, 2010)
2 Petitioners have collected only electronic files. Thus, running searches apparently would
be an automated task, even through 99 GBs of data.
16
(denying motion to quash where Petitioner claimed that it would require "potentially hundreds of
man power hours to review" records for responsive material and potentially cost "tens of
thousands of dollars" as "conclusory")
Petitioners complain generally that the Subpoenas request documents concerning their
investments in 33 issuers and their communications about three issuers with 60 individuals.
(Brauser Mem. at 11-12.) But they fail to explain why searching for those particular entities and
communications would be burdensome. To the contrary, in Commission counsel's first
communication with Petitioners' counsel, he maintained that his clients had never heard of many
of these entities or individuals. (Brown Decl. ¶ 12.) If so, Petitioners will have few documents
to produce and thus cannot complain that their document review and production would be
burdensome.3
III. Because Petitioners Are Interested Non-Parties, They Should Bear the Costs of
Production (Including the Attorneys Fees Incurred in Filing Their Motion to
Quash)
As interested non-parties, the Petitioners should bear the costs of production. Rule 45
permits cost shifting where the equities demand it. But "[w]hen a party from whom documents
are sought is not a `classic disinterested non-party,' . . .the court can order that the non-party
produce the documents at its own expense." In re Seroquel Prods. Liab. Liti~., No. 06-md-1769,
2007 WL 4287676, at *3 (M.D. Fla. Dec. 6, 2007) (citation omitted). An interested non-party is
one who "does not have an actionable right at issue in the litigation, but has a significant,
j Notably, Petitioners do not claim that the Subpoenas lack particularity. Nor could they.
By seeking communications with identified individuals, for example, the Subpoenas provide
readily applicable search terms and make no generalized requests for "all communications" with
anyone regarding a particular subject matter. Compare Davidson v. Gov't Emp. Ins. Co., No. 09
Civ. 727, 2010 WL 11507180, at *2 (M.D. Fla. Mar. 19, 2010) (Brauser Mem. at 10) (quashing
subpoena that asked for "entire and complete" client files from client's attorney, which would
include documents unrelated to the underlying litigation at issue).
17
underlying connection to the case and, typically, some sort of financial or reputational stake in
the litigation's outcome." Ala. Aircraft Indus., Inc. v. Boeing Co., No. 11 Civ. 3577, 2016 WL
9781825, at *5 (N.D. Ala. Feb. 25, 2016); see also United States v. Blue Cross Blue Shield of
Mich., No. 10 Civ. 14155, 2012 WL 4838987, at *3 (E.D. Mich. Oct. 11, 2012) (where nonparty
was "substantially involved in the underlying transaction and could have anticipated that [the
transaction would] reasonably spawn some litigation, expenses should not be awarded")
(quotations omitted).
Petitioners are interested non-parties. First, they are the sons of a Defendant in the Honig
case. ,Second, they appear to have actively invested in at least some of the issuers that form the
pattern of fraudulent schemes the Complaint alleges; the limited documents collected to date
show that all three were frequent co-investors with their father in issuers in which they all
invested alongside Honig. They thus have a significant reputational and financial stake in the
litigation's outcome. For example, the Commission hopes to prevail on its Section 13(d) claims
against Michael Brauser because he made false Schedule 13G filings that failed to disclose his
membership in a group with Honig and others. If the Commission prevails, that outcome would
have significant financial and reputational implications for all members of the investment group,
including potentially Petitioners, who co-invested with their father as part of the same group.
In addition, Petitioners have not met their burden of establishing financial inability to
shoulder the costs of production, as they must to prevail on this ground. See Ala. Aircraft, 2016
WL 9781825, at *6 (subpoenaed party who demonstrated with "impressive specificity" its
financial inability to comply with subpoena allowed to shift half the costs of production).
Petitioners have made no such showing.
The final factor courts consider also militates against cost shifting here. Where the case
18
is of public importance, cost shifting is typically rejected. E.g_, Blue Cross Blue Shield of Mich.,
2012 WL 4838987, at *4 (antitrust suit brought by United States is matter of public interest); In
re World Trade Ctr. Disaster Site Liti~., No. 21 MC 100 (AKH), 2010 WL 3582921, at *2-3
(S.D.N.Y. Sept. 14, 2010) (cost-shifting denied where there was substantial public interest in
resolving 10,000 claims arising out of 9/11 attack). As an SEC enforcement action, the Honig
case is a matter of public importance. When "suing to enforce the securities laws, the SEC is
vindicating public rights and furthering public interests." SEC v. Citv of Miami, 581 F. App'x
757, 759 (1ltl' Cir. 2014) (quotations omitted).
Nor are Petitioners entitled to attorneys' fees incurred in filing their Motion. Although
the party opposing a motion to quash is not required to modify it of its own accord, Wiwa, 392
F.3d 812, 821-22, Petitioners' claim that the Commission refused to negotiate a reduction in
scope is untrue. (Brown Decl. ¶¶ 10-14.) Petitioners decided to file this motion without
awaiting the Commission's views on the terms they offered or engaging in any meaningful
dialogue regarding the scope. Any costs of the litigation Petitioners precipitously initiated
should be borne entirely by them.
[L~
CONCLUSION
For all the foregoing reasons, Petitioners' Motion should be denied.
Dated: New York, New York

November 18, 2019 Respectfully submitted,
SECURITIES AND EXCHANGE

COMMISSION
By:
N ncy A. Biow
Jac Kaufman
200 Vesey Street, Suite 400
New York, NY 10281
(212) 336-1023 (Brown)
Attorneys for Respondent Securities and

Exchange Commission
20
CERTIFICATE OF SERVICE
Ihereby certify thatI caused the foregoing Respondents' Memorandum of Law in

Opposition and the Declaration of Nancy A. Brown, executed November 18, 2019, with
Exhibits, to be served on Petitioners by mailing a copy of the same on November 18, 2019, via
UPS Overnight, to:
Adam L. Schwartz
Homer Bonner Jacobs Ortiz, P.A.
1200 Four Seasons Tower
1441 Brickell Avenue
Miami, Florida 33131
anc .Brown
i
21

SEC Response To Brauser Family Motion To Squash Subpoena Nov 2019

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Case 1:19-mc-24587-MGC Document 5 Entered on FLSD Docket 11/18/2019 Page 1 of 26

UNITED STATES DISTRICT COURT

SECURITIES AND EXCHANGE

Attorneys for Respondent Securities and

November 18, 2019

1. The Commission's Complaint .............................................................................................2

2. Daniel Brauser's, Joshua Brauser's and Ben Brauser's Co-investments with

3. Ben Brauser's Additional Involvement in Michael Brauser's Investments.........................4

4. Relevance of Michael Brauser's Investments in Issuers Other than the

5. The Commission's Attempts to Lessen Petitioners' Burden of Compliance ......................6

II. Petitioners Have Not Established Undue Burden ............................................................. 10

A. The Subpoenaed Documents Are Relevant to the Underlying Litigation and

1. The Information Sought Is Relevant to the SEC v. Honig Matter ........................11

3. Petitioners Have Waived Their Objection that the Commission Could

Benfatto v. Wachovia Bank, N.A., No. 08 Civ. 60646, 2008 WL 4938418

Coleman v. Lennar Corp., 18 MC 20182, 2018 WL 3672251

Eastwood Enter., LLC v. Farha, 07 Civ. 1940, 2010 WL 11508180

Espinosa v. 2K Clevelander, LLC, No. 17 Civ. 22783, 2018 WL 7820598

Goodman-Gable-Gould-Co. Inc. v. Tiara Condo. Assoc. Inc., No. 06 Civ. 80441,

Hallwood Realty Partners, L.P. v. Gotham Partners, L.P.,

Hawkins v. Medapproach Holdings, Inc•, No. 13 Civ. 5434, 2014 WL 11350177

In re DG Acquisition Corgi, 151 F.3d 75 (2d Cir. 1998)...............................................................15

In re Seroquel Prods. Liab. Liti~., No. 06-md-1769, 2007 WL 4287676

In re World Trade Ctr. Disaster Site Liti~., No. 21 MC 100 (AKH),

Lerner v. Millenco, LP, 23 F. Supp. 2d 337, 344 (S.D.N.Y. 1998) .................................................5

Manhattan Constr. Co. v. Phillips, No. 09 Civ. 1917, 2011 WL 13214355

Morales v. Freund, 163 F.3d 763 (2d Cir. 1999) ...........................................................................13

Plouffe v. GEICO Gen. Ins. Co., 16 Civ. 25145, 2017 WL 7796323

Wellman v. Dickinson, 682 F.2d 355 (2d Cir. 1982) ................................................................5, 13

Securities Act of 1933

Section 17(a), 15. U.S.C. § 77q(a) .............................................................................................3

Securities Exchange Act of 1934

Section 10(b), 15 U.S.C. § 78j(b) ............................................................................................. 3

Rule lOb-5, 17 C.F.R. § 240.1Ob-5 ......................................................................................3

Section 13(d), 15 U.S.C. § 78m(d) .................................................................................. assim

Rule 13d-5(b)(1), 17 C.F.R. § 240.13d-5(b)(1) ...............................................................4-5

Fed. R. Civ. P. 26 ...........................................................................................................................11

Fed. R. Civ. P. 45 ...............................................................................................................10, 14, 17

Respondent Securities and Exchange Commission (the "Commission") respectfully

and Joshua Brauser (collectively "Petitioners")

sources of relevant information, which they should be required to produce.

privileged information, which he should be required to produce.

Petitioners' principal objection to the Commission's subpoenas issued September 30,

and responsive material that they would have to review to produce.

The Commission's Complaint. On September 8, 2018, the Commission filed its

Amended Complaint, on March 8, 2019 ("Complaint" (submitted herewith as Exhibit A to

The Complaint alleges adecade-long pattern of fraudulent pump-and-dump schemes

together to disclose their collective ownership.

Joshua Brauser and Daniel Brauser.

2. Daniel Brauser's, Joshua Brauser's and Ben Brauser's Co-investments with

(~E ., Brown Decl. ¶ 6 and Ex. A.)

3. Ben Brauser's Additional Involvement in Michael Brauser's Investments. From

4. Relevance of Michael Brauser's Investments in Issuers Other than the Three

equity securities —are questions of fact. Roth, 489 F.3d at 508.

numerous prior occasions").

In the Commission's underlying case, Defendant Brauser himself acknowledged the

Commission had placed Defendant Brauser's "pattern of `pump-and-dump schemes"' involving

Federal Rules of Civil Procedure.").)'

5. The Commission's Attempts to Lessen Petitioners' Burden of Compliance.

In the second meet-and-confer conversation, on November 4, 2019, Petitioner's counsel

"would likely be subject to the attorney-privilege [sic] or the work-product doctrine"

Subpoena in its entirety.

third-party communications over which no privilege claim could obtain.